No Quarter

Daniel Bice | No Quarter

Johnson proves to be a big spender - and taker: Firm pays him $10 million

After dropping nearly $9 million from his own pocket to win a seat in the U.S. Senate, Ron Johnson didn't have to feel the pain for very long.

Johnson's plastics company paid him $10 million in deferred compensation shortly before he was sworn in as Wisconsin's junior senator, according to his latest financial disclosure report.

The first-term Republican declined to say how his Oshkosh firm, Pacur, came up with a figure that so closely mirrored the amount he personally put into his campaign fund.

"You take a look in terms of what would be a reasonable compensation package, OK?" Johnson said this week. "It's a private business. I've complied with all the disclosure laws, and I don't have to explain it any further to someone like you."

Perhaps not, but the deal was enough to raise the ire of the left-leaning good-government types, who are calling for a probe by federal election regulators.

"It looks like a scheme to get around a century-old law" barring corporate donations to candidates, said Mike McCabe, head of the Wisconsin Democracy Campaign. "It's a clever scheme, but it still looks like a scheme to get around the law."

In an interview this week, Johnson emphasized that he has not taken a salary from the plastics manufacturing company since he bought it in 1997.

Records show the Oshkosh businessman still had income of $1.3 million and $2.3 million annually from 2005 to '08 from capital gains, corporate earnings and real estate. In the first half of 2010, he received $650,000 in what he called "pass-through income" from a limited liability company that owned Pacur.

After the election, in which he defeated Democratic U.S. Sen. Russ Feingold, Johnson said he dialed down his active involvement with Pacur and received the deferred compensation package for serving as its CEO over the previous 13 years.

Unlike most deferred package deals, however, it appears that the company had not set aside a specified amount annually that would be paid out when he left the firm. Instead, Johnson said the $10 million payment was "an agreed-upon amount" that was determined at the end of his tenure with the company.

Agreed upon with whom?

"That would be me," he said.

Still, Johnson said he couldn't see why anyone would raise any questions about the going-away present he gave himself. His LLC now owns only 5% of Pacur.

The sum he put into his campaign fund and his deferred compensation payment were "totally unrelated," he said.

"I have no idea what could be suspicious or cynical about this," Johnson said before cutting short the interview. "This was fully disclosed in terms of what I reported."

McCabe said he is not buying it.

"He put $9 million of his own money into the campaign, and then he has the company pay him back shortly after the election," said McCabe, who was unaware of the matter until contacted by No Quarter. "That looks like the company has paid for his campaign."

McCabe noted that for the past 100 years, Wisconsin has barred corporations from giving directly to political candidates. Despite a recent U.S. Supreme Court decision lifting some restrictions on corporate donations, McCabe said the ban on companies giving directly to federal and state candidates remains in effect.

McCabe said it's the timing of the deferred compensation payment that's going to raise eyebrows.

Jay Heck, head of the state's other liberal, good-government group, Wisconsin Common Cause, agreed with McCabe, noting that Johnson has also been doing fundraisers since the election to pay down his campaign debt.

Under federal election law, Johnson can take no more than $250,000 of the money raised after the election to reimburse himself for the $8.7 million he put into his campaign. The rest must be treated as a donation.

"I thought it was supposed to be a self-financed campaign," Heck said. "This raises a number of questions."

The plastics exec isn't the first wealthy businessman to run for office in Wisconsin, Heck noted. But he said he was unaware of any other instance in the state of a politician receiving a payment from his company that was more than his outlay to a campaign.

Actually, Federal Election Commission spokesman Christian Hilland said the situation is a new one on him, too.

Hilland, though, said he couldn't discuss the Johnson matter in particular. All he could say was it would be illegal for a corporation to donate directly to a candidate or for it to give money to a candidate for the express purpose of reimbursing the individual for campaign loans or contributions.

Proving Johnson violated election law would be difficult, according to several election lawyers.

The lawyers said regulators would have to prove that there was at least a tacit agreement between the corporation and Johnson that the deferred compensation would be used to reimburse him for campaign loans or contributions.

To do that, Michael Maistelman, an election lawyer who primarily represents Democrats, said officials would have to find a smoking gun. In the recent felony conviction of railroad executive William E. Gardner, prosecutors turned up both documents and the testimony of an ex-girlfriend to help bolster their case. That, however, is unusual, Maistelman said.

"This would be an uphill battle," he said of an FEC complaint.

Another election lawyer, who represents Republicans and has a national practice, agreed that Johnson likely didn't violate any election laws.

But the attorney said he believes the situation raises a second issue regarding the appropriate use of corporate resources. Most firms, both public and private, include deferred compensation agreements in contracts approved by the corporate board, he said. If Johnson's deal wasn't in writing, he said, that would be "highly unusual."

"The question is: Is it a bona fide deferred compensation agreement?" the national lawyer said. "In other words, was the payment an appropriate use of corporate resources?"